Meta Platforms Inc. (NASDAQ:META) is facing a significant setback as its AI-powered ad tools are malfunctioning, leading to a waste of ad budgets and a decline in sales. This has prompted businesses to reconsider their advertising strategies on Meta’s platforms.

What Happened: Meta’s automated ad tools, particularly the Advantage Plus shopping campaigns, have been misfiring since Valentine’s Day, reported The Verge. The glitch has resulted in a significant increase in cost per impressions or CPMs and a failure to generate sales, causing small businesses to lose their ad budgets.

However, the recurring issues, the Mark Zuckerberg-led company has reportedly not been forthcoming about the performance glitches, leading to widespread uncertainty among advertisers. The company’s customer support has also been affected by recent layoffs, with many inquiries now being directed to AI chatbots.

Marketers say that as opposed to Meta’s enthusiastic promotion of Advantage Plus shopping campaigns as an effortless, “set it and forget it” automated solution to online advertising during earnings calls, the reality has not matched the hype.

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“Meta's unwillingness to be transparent or accountable with the performance issues and glitches is causing mass uncertainty,” stated Karl Baker, founder of meditation startup Mindfulness Works.

“We have a couple of clients for whom we completely stopped Advantage Plus due to these anomalies,” said Aniruddha Mishra, director of growth at Node Media.

Although Meta has refunded some affected businesses, the issues persist, with some clients experiencing CPMs three to four times higher than last year. Meta has denied any glitches, insisting that the tool is functioning as intended.

“The only thing [Meta] acknowledged was there was a platform bug on February 14th and apologized for the inconvenience,” said RC Williams, the co-founder of marketing agency 1-800-D2C.

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As per the report, despite Meta’s assurances, many businesses have stopped using Advantage Plus and reverted to manual ad campaigns. This development is significant as Meta had initially pitched Advantage Plus as a faster and more efficient alternative to manual ad campaigns.

Why It Matters: The malfunctioning of Meta’s AI ad tools comes at a time when the company is already facing legal challenges. In March, Meta was hit with a class-action lawsuit over allegations of misrepresenting the audience size for its Facebook and Instagram advertising services.

Meanwhile, the ad system issues have created an opportunity for competitors. Earlier this month, Elon Musk invited advertisers to return to his social media platform, X, formerly Twitter, following reports of significant issues in Meta’s advertising system.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.